The logistics of India’s food

Here is an interesting supply chain challenge. India has a billion mouths to feed and a large agriculture sector but the process of getting food from field to consumer is hopelessly inefficient.

I am not sure I have much to add except to say that the challenges involved in modernizing India’s grain supply chain seem so large that I am not sure where you would start. In the US, these sorts of problems get solved in a largely decentralized fashion. There are firms of sufficient size both upstream and downstream that they can agree on solutions and make them happen. Here, it’s not clear if anyone outside of the government is big enough to take the lead. Once you get the government involved, there is the risk that decisions favor voters that are likely at risk of losing (e.g., small farmers) over society as a whole.

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In India there are restrictions that private players can’t directly procure from farmers. They have to procure from Government designated centers which are run inefficiently by middle men who many a times form a cartel. Also there is problem of lemons. Farmers don’t separate and grade the produce based on quality, but simply bring it to mandis. The traders on the other hand pay quiet a low price assuming low quality. The middle men also do not pay commensurate premium even if they bring good quality produce.

Worse part is the lack of proper infrastructure for storing the produce. Around 25-30% of fruits and vegetables get wasted away due to lack of proper storage facilities (like cold storages etc.) and transportation. This is where private players are encouraged to pitch in. The FDI in multi brand retail ( in short allowing entry of players like Wal-Mart ) is expected to bring in investment in the back end infrastructure and solve this problem to an extent. But due to political opposition that people employed in the unorganized mom and pop stores will get displaced by big retail it is not still being allowed.

Even if allowed we need to keep in mind the below context:

When compared to US or similar countries, in India the size of the land holdings is extremely small.